What Would It Take To Unseat A Large Listing Site?

About once a month, I get an email from the contact page on this very website that has this rough outline:

I’m upset that HomeAway/VRBO/Flipkey changed their rules.

I wish things could go back to the way they used to be.

Why isn’t there another listing site?

Someone could make buckets of cash if they just made a new site just like the old VRBO.

Occasionally, the person contacting me is even considering becoming the person in step four above.

By nature, I am not a cynical person, but I do like to review marketing and business strategies with a careful eye. Ideas are extremely easy to come up with. An idea is virtually worthless — execution is the powerful ingredient.

I thought I’d share my thoughts on exactly what it would take to execute on how to make a very large and successful listing site for vacation rentals or similar short-term rentals. If you’ve wanted to create a vacation rental listing site alternative, buckle up and keep reading.

Acquire Lots Of Inventory

This, in my opinion, is the missed step in most failed listing sites currently in the marketplace: they have no inventory.

I live in the Myrtle Beach, South Carolina area. Myrtle Beach is often one of the top 3 destinations in the US for short-term rental vacations and attracts millions of visitors per year to stay in vacation rentals and other short-term accommodations (condos, hotels, resorts and homes).

The first thing I do when I see a new listing site alternative pop up is check the inventory in the Myrtle Beach market. Currently, VRBO is home to 7,969 different rentals along the Grand Strand (greater Myrtle Beach market).

It’s not uncommon that a site that intends to compete with VRBO has 10-20 rentals when I look at them.

I’ll make it as simple as I can: guests actually like to search through different rentals when looking for a vacation. Reviewing options, picking between oceanfront and second row, viewing fifty photos per listing is all part of the vacation planning process. If a guest can look through every piece of inventory you have in 15 minutes, the chances of conversion are actually lower than if you have 500 options. Guests want different things: pet friendly, 12 bedrooms, oceanfront, condos/homes/villas and so on.

Inventory is king in the world of listing sites: starting without lots of it is like a car without an engine. Therefore, a listing site that wants to succeed in 2017 and beyond needs to have lots of inventory.

Ramp Up Traffic With Google AdWords

After enough inventory has been acquired on the listing site that a launch is possible, we’re ready to move towards the supply side: website traffic. At first, any brand-new website isn’t going to get much traffic organically from the search engines. While over time this is a very viable marketing tactic, starting a brand-new website means you’ll have to start with traffic right away to help drive bookings towards the inventory that has been added to the site.

The quickest way to ramp up traffic from searchers looking for vacation rentals in any given area is through Google AdWords and Bing Ads.

Even today, large companies like VRBO and HomeAway still spend lots of money on paid traffic text ads to help boost their traffic and drive more bookings. Based on my research, even areas where the current large listing sites rank highly in organic search, they still invest money into paid traffic as well.

According to SpyFu.com data (which is an estimate using click-through-rate data and reviewing search impression data) HomeAway.com spends around $116,000 per month in Google AdWords advertising costs. VRBO also has their own dedicated budget for paid search which SpyFu estimates to be around $103,000. I also checked Airbnb’s Google AdWords spend and they rack up an (estimated) impressive $323,000 per month with Google.

These campaigns are very complex, comprising tens of thousands of landing pages, keyword bid match types and ad copy, a large investment is needed to drive traffic to a new listing site. It’s reasonable that a site competing with these in paid search would need a minimum of $50,000 per month to gain a large amount of traffic to each destination page.

In addition to the large investments needed that go straight to Google, you’ll also need a team to manage these campaigns, landing pages, match types and other account performance metrics. Large agencies dealing with spends in these ranges often ask for 15-20% of total ad spend to manage the performance of these accounts. It’s likely that another $10,000 per month will need to be budgeted to allow for management of the Google AdWords and Bing Ads accounts.

Gain Enough SEO Authority To Level Out Ad Spend

Budgeting $60,000 per month in search ad spend means that ramping up an organic (SEO) marketing strategy is key! According to SimilarWeb, while both VRBO and HomeAway invest money in paid search, the majority of their search traffic comes from organic rankings and clicks. VRBO is estimated to have upwards of 80% of their search traffic from organic (non-paid clicks) from Google.

While it’s hard to compress a SEO strategy into just a few sentences, one metric that we can review and compare is the number of links pointing to a large site like HomeAway.com. In Google’s ranking algorithm, links are like “votes” for a website to rank higher in the search results. It’s very to easy to see that listing sites that do well in organic search have lots of links pointing towards them and ones that don’t rank well do not have nearly as many links.

Using Ahrefs data for backlink counts, I checked the number of links pointing to Flipkey, HomeAway and VRBO as of early September of 2016.

VRBO — 3.9 million backlinks from 33,500 different domains.

Flipkey — 1.3 million backlinks from 12,500 different domains.

HomeAway — 16.9 million backlinks from 25,400 different domains.

To compete with these listing sites in organic search, a new listing site will need to quickly ramp up PR efforts and content marketing efforts to help attract tens of thousands of mentions (and links) on the web. Reaching these lofty goals will take some serious talent. It’s reasonable to expect to hire around 3-5 team members to focus just on organic search traffic. The median salary for a SEO Analyst is $83,651/year according to PayScale.com. A monthly payroll budget for a small but effective marketing team could be around $25,000 to $50,000 depending on the salary of each team member.

World-Class Engineers & Product Teams

While marketing is great (I love it!), complex websites dealing with payment systems, dynamic pages and large databases require web engineers with talent and experience. I am no expert in building large-scale web applications, but even a small nimble team will need around 3-5 people to help create a listing site in a reasonable timeframe. The average salary for a senior Ruby On Rails engineer is $116,442 while junior-level programmers are $77,306 according to PayScale.com. Therefore, budgeting around $30,000 – $40,000 per month for payroll for an engineering and web development team should help create the back-end infrastructure and front-end interfaces for both owners and managers to interact with a new listing site.

To make a great website for both guests and owners, it could take a few months of building a framework, application settings, API and other technical pieces. In addition to the costs of hiring a team to build a listing site, hardware is also needed to host the databases, files, staging server and live website. Website hosting for a large website can exceed $500 per month depending on the provider used.

Convince Guests To Move Backwards?

Here’s the hardest part of tackling a project of this scale and being effective: guests have moved their expectations forward. Listing sites like VRBO offer insurance covering any misrepresented rentals, promised refunds of security deposits and more. Any new listing site will have to gain trust through similar protections, which are not free.

Another major motivation that owners aim towards of returning to the “old VRBO” is the love of moving away from instant bookings. Many owners and property managers prefer to speak to the guests and perform a “gut screen” of each renter to see if they’re a good fit.

I’ve got news: guests don’t want that. If short-term rentals are going to take a chunk from hotel revenue, the booking experience needs to mimic that of a high-end hotel chain, not a cheap motel.

Perhaps the largest hurdle that any listing site may face as it seems (some) owners want it to exist is this fact: you can’t stop progress. Guests want to be able to book instantly without fear of cancellations or follow-up calls from a nervous host. Building a listing site requires that you make all properties online-bookable from the start without exception. Anything less isn’t progress.

Thoughts On Creating A Listing Site Alternative

Reading through this may have you thinking I am firmly against the idea of a new listing site to take create serious competition with the current market stranglehold that HomeAway has.

This is 100% false.

However, creating such a business isn’t cheap, easy or without the need for innovative minds working behind the scenes. Any serious competitor to HomeAway will probably come from another large travel company expanding into the vacation rental or short-term rental market.

The alternative today could also be a VC (venture capital) funded startup that aims to compete with HomeAway.com and VRBO.com for market share. This is a plausible scenario has any new travel site should be given a reasonable timeframe to see success and (hopefully) consistent profits.

However, personally, I do not feel that a large listing site will come from either a bootstrapped company nor a VC-funded startup.

Why?

Bootstrapping a listing site, as we discovered during my research, isn’t cheap. Not many companies have the $3-5M startup costs to invest in creating a new segment in a (fairly) crowded market.

Any listing site funded by VC will likely also face the fate of Dwellable, VacationRentals.com and dozens of others: any success is met with a large check from Expedia. Any VC-backed listing site with investors will likely exit in the face of a large offer from Expedia, TripAdvisor or Priceline, leading us back to square one by upsetting loyal owners and manager by merging policies with that of a large listing site.

As a result, I believe that a successful listing site could come from other profitable companies in the travel space already like HotelTonight or a similar company. As another alternative, the rise of location-specific websites and niche listing sites could provide more competition for the main listing sites.

Predictions are difficult and the vacation rental market has a great way of rewarding companies that make a splash by earning loyal guests that want to come back again and again. If you’re a vacation rental manager or host, focusing on that will always lead to excellent results.

What are your thoughts? Do you see a new listing site gaining market share in 2017 and beyond? If so, where will it come from? I’d love to hear from you in the comments below.

Reader Interactions

Comments

Great post Conrad. I think there’s definitely room for another listing site (from the supply side) – however, like you mentioned the costs are extreme.

Younger guests are moving to an instant book model but I think you won’t need to convince guests to go backwards – because you won’t be going backwards. The listing website will use request to book and instant book models – however, it could give users the option to pay a subscription fee (like the old models) or they can choose a % of the booking – and NO GUEST SERVICE FEES!

Booking fees & guest service fees are some of the biggest complaints we are seeing. It’s causing owners to ramp up the price of their home in some cases by 15-20%. Therefore, the guests can end up paying £1,200 for a £1,000 rental. They expect quality for that price… but on arrival find it’s not the quality they paid for. This leads to unhappy guests & bad reviews.

There’s definitely room in the market for a listing site that promotes the fact it’s supporting local businesses by connecting the guest directly to the business. It’s all about educating the guest first. Lot’s of people don’t realise they don’t need to pay a service fee and by booking direct, support the business they are actually using.

Taking a small percentage of the owner’s portion and moving away from guest fees is a good value proposition, in my opinion. I do think there is plenty of room for a new listing site and education is key perhaps to see the success there. Will be an interesting space to follow over the coming months and year to see if anyone throws their hat into the ring to compete with HA/Expedia.

My personal picture of Holiday rentals market right now , is that of a specific boundaries lake, where 4 hippos ( Expedia-Trip Adv-Booking-Airbn ) are fighting furiously between themselves. And in this case victims are always the frogs, hosts-guests alike !

Probably doesn’t have a meaning to start up even another army with the same arms like a huge VCapital. because would need millions with an uncertain outcome victory, or which would result as a figure to be sold or merge soon or later to one of these hippos.

Eventually, in a start up campaign we should use the most commonly used techniques of guerrillas against the enemy which are tips from Chinese General,Sun Zi Bing Fa (5th century BC) “All warfare is based on deception. Hence, when we are able to attack, we must seem unable; when using our forces, we must appear inactive; when we are near, we must make the enemy believe we are far away; when far away, we must make him believe we are near.”

Certainly will be needed a really innovative central idea, with such power that will attract wide (non paid) interest of social networks, journalists,and media who in turn will bring owners and customers together. Most alike, will need a different capital structure, where Hosts and Guests are some sort of share holders also, to this new site. This fact, (like in guerrilla) ties with complicity fighters, and faith of the few to win .

***I can come back with specific propositions of project if invited so …

In my opinion, this is the most powerful statement in your entire article: “As another alternative, the rise of location-specific websites and niche listing sites could provide more competition for the main listing sites.”

I think we are in the infancy stages of a major tectonic shift in the vacation rental listing sites space. Niche and regional sites (example: SoCoastal) with granular focus are starting to pop-up more frequently and gain traction.

These type of sites may not have the power to compete with sites like HomeAway, FlipKey & Airbnb on a global or national level — but they don’t want to, nor do they need to.

Additionally, the more momentum these sites gain, the more pressure the large sites will begin to feel; causing them to:

(a) adapt aka change the things we don’t like about them and/or (b) lose market share

Either way, it’ll benefit the supply and demand side of the equation.

PS: +2 points for the HotelTonight mention. One of my favorite companies.

Great, but a listing site does not really need to deal with payments in this day and age , so you won’t need “complex websites dealing with payment systems, dynamic pages and large databases require web engineers with talent and experience”. When anyone from Square to Stripe to PayPal to everyone in between offers quick and easy credit card payments and there are a bunch of booking back end providers. Only advertising. Look at VHR (part of TripAdvisor) model. They do not deal with payments, bookings, cancellation policies. Hence, CS is almost non existent (and it should be that way – once a listing is set up and running, it is on autopilot – owner handles payments, cancellations, insurance, you name it). Money is still to be made if someone takes up such a venture – of course, if they do not count on being paid 00+M a year.

Good points! I was focusing more on the other listing site models currently out there, but the VHR example is a great one of a different approach. I still do think there would need for customer support when a guest has an issue with a listing/owner and also the listing site needs to build payment gateways to make sure *they* get paid when adding listings too.

The problem with any new listing-site will be, that it will have to follow the same marketing and financing cicles as the “Big Four”. The more money for advertising and branding, the better the results. Even with a new successful listing-site the major winner will be only Google. Your post describes this cicle.

What can be the reason to invest into another listing-site and enter this battle of the giants? To have a little less comissions for owners and less fees for renters? Making the individual stay a bit cheaper then with expensive established OTAs? That seem to be a low motivation. The result would be just another OTA with a little bit more fair conditions.

Maybe let us open a discussion about future vr-marketing and think about how it can work in some years. The real innovation would something without the OTAs, who are just intermediaries for the advertising. Let us look for “listing-site similars” to establish peer-to-peer connections from guest and owners.

For sure in future the renters will use more smartphones, it will be more voice oriented, it has to be more solid and secure and more easy to book. I personaly think, that in some years we will ask the phone to book something instead searching through lists. Software will do many processes for us – like processing payment schedules and maybe even seection accoring our wishes.

It will be not “some bucks more or less per booking” but the well curated offer from peer to peer. I can imagine a simple – free or very cheap – app for a smartphone using data of one of the actual VR-metasearches (or own ones) – to have the critical mass in offers (“Inventory”) – in combination with a small tool (also cheap) for owners to include the direct offer and exclude individually their listings published from OTAs. No new listing site – just “All” available offers combined. And in difference to metasearch alone: Indviduals are able to present themselves ahead of the OTAs. Leaves the options for owner AND renter to choose.

Great article. I have recently released ownerholidays.com, and have most of the challenges you outline!

But I don’t think I want to become another Airbnb. The vacation rental market is huge, and one size does not fit all. I would be more than happy if I captured the 5% of the market which wants close contact between owner and guest, the big boys can keep their 95%.

Also, startup costs – I put together the web site with about 1 month of my own effort (free ???!!!) and will not be paying for Google ads any time soon. I am starting with viral marketing, encouraging owners to advertise (again, free for the moment) and expecting that the owners’ individual networks will do much of the marketing for me. An additional incentive is that owners would eventually own most of the equity – I would rather have 10% of a big pot than 100% of a tiny pot.